AI may be much more than a buzzword for Shopify
Shopify (NYSE:SHOP) is less than two weeks away from reporting earnings. The e-commerce company is expected to post its third straight profitable quarter and generate revenue of $2.07B when the report lands on the laps of investors on February 13.
The earnings conference call could delve into the AI upside for Shopify (SHOP) and give investors something more tangible to latch on to. RBC Capital Markets thinks AI will take Shopify (SHOP) to the next level. “Shopify’s embrace of AI will strengthen its value proposition to merchants, resulting in a resurgence of merchant growth and monetization of commerce, in our view,” updated analyst Paul Treiber. The firm believes Shopify’s AI pivot will result in a deeper competitive moat over the long-term and improved economics for the company, both of which are seen justifying the premium valuation in play.
Underpinning the strategy shift, Shopify (SHOP) divested its logistics arm to Flexport to refocus on the core software platform. Now, RBC Capital maintains that a Shopify-powered AI copilot can deliver significant value to merchants, from making recommendations to actually carrying out the recommendations with automated optimization and configuration. What that indicates to RBC is that Shopify’s total addressable market is no longer just limited to e-commerce.
“AI will accelerate Shopify’s (SHOP) take rate expansion and operating leverage. We forecast Shopify’s total attach rate to rise 16 bps over the next 3 years on pricing increases, upgrades to higher-priced plans, increasing payments penetration, uptake of new software offerings (e.g., POS Pro, Markets Pro), and referral fees on third-party services.”
Earlier in the week, Shopify (SHOP) outlined how its new Media Editor product will enable sellers to use generative AI to create original images and edit existing ones to use on their online store, according to the release. The tool will perform the tasks with only a few clicks or keywords. Meanwhile, the Ottawa-based company said Sidekick will be the world’s most useful AI-enabled assistant for commerce.
During its last earnings call (transcript), Shopify (SHOP) executives outlined some of the ways that AI has already been embedded into its solutions. The upcoming conference call could detail specific revenue and costs benefits for the company and merchants from both the current and upcoming AI initiatives.
While Wall Street analysts have a consensus Buy rating on Shopify (SHOP), Seeking Alpha analysts have been doling out mixed ratings Richard Durant (Hold), Wright’s Research (Sell), Lightning Rock Research (Sell), Julian Lin (Hold), Dominic Rinaldi (Buy).